May 2016 Q6 b.

A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization’s actions, objectives and policies.
Groupings of stakeholders
When identifying stakeholders it is not enough to focus on the formal structure of the organisation. It is necessary to have a look at informal and indirect relationships too. There are a number of ways of classifying stakeholders according to criteria based on how stakeholders relate to organisational activities. A useful model for this purpose is to visualize the stakeholder environment as a set of inner and outer circles. The different classifications of organisational stakeholders are:
1. Internal and external stakeholders
2. Narrow and wide stakeholders
3. Primary and secondary stakeholders
4. Active and passive stakeholders
5. Voluntary and involuntary stakeholders
6. Legitimate and illegitimate stakeholders
7. Financial and Non-financial stakeholders
1. Internal versus external stakeholders
Here, stakeholders are distinguished depending on whether they are part of the organisation – i.e. have a formal working relationship with the organisation – or are external to the organisation. Internal stakeholders include employees, management and board of directors, and possibly trade unions. External stakeholders include customers, competitors and suppliers. It could also include all other groups which do not form part of the internal organisation’s structure.
2. Narrow versus wide stakeholders
This classification describes the degree to which the stakeholder group is affected by the activities of the organisation.
Narrow stakeholders are used to describe stakeholders who are most affected or who are most dependent on organisational output. Examples of such stakeholders include shareholders, employees, management, customers and suppliers.
Wide stakeholders, on the other hand, refer to those who are less affected or dependent on the organisation’s output. This category includes government and its agencies, the wider community and non-dependent customers.
3. Primary versus secondary stakeholders
This classification distinguishes stakeholders based on the extent of influence of the organisation on the stakeholder and vice versa.
Primary stakeholders refer to stakeholders that have a direct influence on the company and without whom it would be difficult to operate. They are fundamental to the company’s profitability and health. The government and its agencies, shareholders, board of directors, management and other employees as well as customers fall into this category.
Secondary stakeholders, in contrast, are those who have a limited direct influence on the organisation and without whom the company would survive – though with little success. They are generally described as groups that the company depend on for success. Secondary stakeholders describe relationships that arise because of specialised interests. Examples of secondary stakeholders include communities where companies are located, the media, lobbyists, competitors, etc.
4. Active versus passive stakeholders
This classification distinguishes between those that seek to participate in organisational activity and those that do not.
Active stakeholders refer to those that wish to participate in the activities of the organisation. It includes management and employees, but may also include regulators, environmental pressure groups and suppliers.
Passive stakeholders describe those that do not wish to participate may include shareholders, local communities, government and customers.
5. Voluntary versus involuntary stakeholders
This classification of stakeholders removes the element of choice associated with active and passive participation. It sub divides the active group into two elements.
Voluntary stakeholders refer to those stakeholders that choose to be involved in organisational decision making. It involves groups such as management, employees’ environmental group and active shareholders. These stakeholders can withdraw their interest in the short-term.
Involuntary stakeholders are those that do not choose to be involved in organisational decisions, but become involved for a variety of reasons. This could include regulators, key customers, suppliers, government, natural environment and local communities. They cannot withdraw in the short-term to medium-term.
6. Legitimate versus illegitimate stakeholders
This classification describes the degree to which the claim of the stakeholder is considered a valid claim. It can be a subjective classification with debate surrounding certain group’s claims, and can lead into the concept of whether stakeholders are recognised by the organisation or not.
Legitimate stakeholders are those who have an active economic relationship with an organisation, such as customers and suppliers, are called.
Illegitimate stakeholders are those without such a link where there is no case for taking their views into account when making decisions are called. Typical examples of such group are terrorist organisations.
7. Financial versus Non-financial stakeholders
Financial Stakeholder: They are those with a financial relationship with the organisation, in other words should financial problems occur to the organisation, then these stakeholders will suffer. Examples are shareholders and other investors, creditors and suppliers.
Non-Financial Stakeholders: They’re interested in how the organisation behaves and are often more powerful than the financial stakeholders due to the influence they have over it. Examples are Media, Activist groups and Regulators.